Investment industry heavyweights CFA Institute, GSIA and PRI announce harmonized definitions for responsible investment approaches
CFA Institute, the Global Sustainable Investment Alliance (GSIA), and Principles for Responsible Investment (PRI) have issued a new resource that aims to bring greater understanding and consistency to terminology used in responsible investment, specifically:
- Screening
- ESG integration
- Thematic investing
- Stewardship
- Impact investing
For each term, CFA Institute, GSIA, and PRI have outlined a definition, detailed explanation, a list of definitions that served as the primary inputs, and guidance for using the terms in practice. The paper is intended for investors, regulators, policymakers, and other market participants.
The collaboration was inspired by calls from regulators for voluntary standard setters to develop common terms and definitions to ensure consistency throughout the global asset management and wealth management industries.
Promoting the consistent and precise use of terminology contributes to efforts to address greenwashing.
The work to harmonize terminology also serves to deepen understanding of the nuances of responsible investment approaches. It counters confusion about what different responsible investment strategies seek to achieve by clearly differentiating the objectives of approaches, such as ESG integration and impact investing.
The harmonized terminology contained in the joint resource responds to shifts that have taken place in the responsible investment landscape. Prior versions of the definitions were, in some cases, specific to investments in listed companies. These updated definitions reflect the reality that responsible investment approaches can be applied to a wide range of investment styles and asset classes, spanning both public and private markets.
The three organizations emphasize that this resource clarifies and harmonizes existing terms and definitions and does not create new terms or meanings.
Margaret Franklin, CFA, President and CEO at CFA Institute, comments:
“Technical terminology is an important part of professional practice. New terms are always emerging alongside new ideas, and definitions evolve over time. It’s important to standardize terms and definitions as practices mature so that professionals can communicate efficiently and effectively with each other as well as with clients, regulators, and other market participants. We believe this work will serve as a valuable resource for all market professionals.”
Simon O’Connor, Former Chair of the GSIA, comments:
“For many years, our organizations have been working to define and clarify the language of responsible investment. This foundation of experience and expertise enabled us to come together with a common purpose to clarify and harmonize these definitions on a global scale. We now encourage the investment industry and regulators to adopt these definitions to create greater consistency.
David Atkin, CEO at PRI, comments:
“Responsible investment has grown significantly, and so have the expectations for clear and transparent communication. Investors need language that enables them to communicate their responsible investment practices accurately, succinctly, and consistently. By unifying around common definitions, we support our signatories and members to communicate with confidence.”
The paper is available to read on each of the respective organization’s websites:
CFA Institute: click here
GSIA: click here
PRI: click here
About Global Sustainable Investment Alliance (GSIA)
GSIA is a global collaboration of sustainable investment membership-based organizations, aiming to unlock the power of the worldwide financial services industry to drive leadership, achieve a substantial impact on key global challenges, and accelerate the transition to a sustainable future.
GSIA simultaneously works to enhance the synergies between members, participate in global initiatives, and provide advice and support to local and regional sustainable investment organizations as they setup and grow.
GSIA’s members are drawn from Europe, Asia-Pacific and North America. Collectively GSIA’s members represent the mainstream of global finance and investment, managing tens of trillions of dollars in assets. GSIA members include Eurosif (European Sustainable Investment Forum), Japan SIF (Japan Sustainable Investment Forum), RIAA (Responsible Investment Association Australasia), RIA Canada (Responsible Investment Association Canada), UKSIF (UK Sustainable Investment and Finance Association), US SIF (the Forum for Sustainable and Responsible Investment).
About The Principles for Responsible Investment (PRI)
The Principles for Responsible Investment (PRI) is the world’s leading proponent of responsible investment. Supported by the United Nations, it works to understand the investment implications of environmental, social and governance (ESG) factors and to support its international network of investor signatories in incorporating these factors into their investment and ownership decisions. The PRI acts in the long-term interests of its signatories, of the financial markets and economies in which they operate and ultimately of the environment and society as a whole. Launched in New York in 2006, the PRI has grown to more than 5,000 signatories, managing over US$121 trillion. For more information visit www.unpri.org.
[1] This definition of impact investing is based on the Global Impact Investing Network definition of impact investments, which it defines as “investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return”.